CLEVELAND, Ohio — Cleveland-Cliffs reported strong sales and income in the first quarter of 2022, and CEO Lourenco Goncalves said the company’s commitment to a U.S. supply chain was a big part of making it happen.
The flat-rolled steel company reported $6 billion of revenue and $801 million of net income for the first three months on the year. In Q1 of 2021, the company had $4 billion in revenue and $41 million in net income.
In a Friday morning earnings call, Goncalves explained how Russia’s invasion of Ukraine was affecting the steel industry, which is dealing with supply chain disruptions because of the war. He said those disruptions weren’t hurting Cleveland-Cliffs because the company makes its raw materials in the U.S.
According to the CEO, the U.S. imports about 6 million tons of pig iron each year. About 4 million tons of the pig iron, which is melted down and processed into steel, was coming from Ukraine and Russia, he said.
With Russia’s invasion of Ukraine, much of Ukraine’s infrastructure is damaged, making exports from there both now and in the future difficult. Russia is under many trade restrictions, although Goncalves said the Russians are trying to get around those by selling to other countries as third parties.
Cleveland-Cliffs became vertically integrated over the last few years as it bought other companies — like AK Steel and ArcelorMittal USA. It now makes all of the company’s pig iron, iron ore pellets and hot briquetted Iron (HBI) in house in Midwest states such as Ohio, Michigan, Indiana, Minnesota and Michigan. When asked by cleveland.com, the company said it doesn’t conduct any business in Russia or import raw materials from the country.
“The Russian aggression toward Ukraine has made it absolutely clear to everyone what we at Cleveland-Cliffs have been explaining to our clients for some time: overly extended supply chains are weak and prone to break down, particularly steel supply chains that are dependent on imported feedstock,” Goncalves said in a news release.
He said on an earnings call Friday that de-globalization should happen and would be a “game changer.”
The CEO noted that automakers, Cleveland-Cliffs biggest clients, can’t meet demand because of their reliance on foreign-made semiconductor chips.
“It should be a clear call for the end of globalization,” he said.
Automakers bought much more steel in the beginning of 2022, and Cleveland Cliffs reported profits despite steel prices dropping from September through the beginning months of this year.
Goncalves told analysts that automakers were moving in the right direction and Cleveland Cliffs expects more sales as vehicle manufacturing recovers.
Cleveland Cliffs is also working towards growing its scrap industry, saying it could save emissions by making flat-rolled steel out of high quality scrap. Goncalves said electrical steel, an iron alloy tailored to produce specific magnetic properties, will be in demand as automakers work on electrical vehicles. Cleveland Cliffs is positioning itself to grow that part of the business, he said.
The company’s reported results beat revenue estimates, which were at $5.43 billion, according to Seeking Alpha, a stock market analysis website. Cleveland Cliffs earnings per share, at $1.71, also beat expectations of $1.41 per share, according to Yahoo Finance.
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